Market Structure

FX Clearing Price Examples

Example 1

Example 1: Scenario

Order 1: Buy 100m EURUSD @ 1.0850
Order 2: Sell 100m EURUSD @ 1.0840

Any price in the interval [1.0840,1.0850] is a valid clearing price. In the absence of other constraints, OneChronos fills at the midpoint of the clearing price range. Both orders receive symmetrical price improvement. In the traditional FIFO exchange model, all price improvement would have accrued to the aggressor. For example, had the seller been a resting order @1.0840, even if the buyer were willing to pay up to 1.0850 the trade would be filled @1.0840 and the buyer would receive 10 pips of price improvement.

Example 2

Example 2: Scenario

Order 1: Buy 100m EURUSD @ 1.0850
Order 2: Buy 100m EURUSD @ 1.0850
Order 3: Sell 200m EURUSD @ 1.0840

Example 2: Outcome

Orders 1 and 2 buy 100m EURUSD @ 1.0845 Order 3 sells 200m EURUSD @ 1.0845

Example 2: Key Takeaways

Within an auction, all orders for a specific trading symbol will fill at a uniform price. If there is no imbalance, all orders will fill in their entirety.

Example 3

Example 3: Scenario

Order 1: Buy 100m EURUSD @ MID
Order 2: Sell 100m EURUSD @ 1.0840

Example 3: Outcome

Orders 1 and 2 fill 100m EURUSD @ 1.0845.

Example 3: Key Takeaways

At commencement of the optimization process MID for EURUSD is calculated at 1.0850 via independent market data and is where Order 1 and other mid-pegged orders are evaluated. Given a match is possible the optimization looks to maximize notional price improvement and the clearing price is calculated as a 1.0845. Order 1 has received price improvement beyond MID given Order 2 is willing to sell through MID.

Example 4

Example 4: Scenario

Order 1: Buy 200m EURUSD @ MID
Order 2: Sell 100m EURUSD @ MID
Order 3: Sell 100m EURUSD @ 1.0840

Example 4: Outcome

Order 1 fills 200m EURUSD @ 1.0850. Orders 2 and 3 fill 100m EURUSD @ 1.0850.

Example 4: Key Takeaways

At commencement of the optimization process MID for EURUSD is calculated at 1.0850 via independent market data and is where Order 1, Order 2 and other mid-pegged orders are evaluated. Given a match is possible within order constraints, the optimization’s primary objective is to maximize notional price improvement and secondarily liquidity cleared. The clearing price is calculated as 1.0850.

Example 5

Example 5: Scenario

Order 1: Buy 100m EURUSD @ 1.0850
Order 2: Buy 100m EURUSD @ 1.0850
Order 3: Sell 100m EURUSD @ 1.0840

Example 5: Outcome

Orders 1 and 2 have a 50/50 chance of receiving a fill for 100mm EURUSD @ 1.0845. Order 3 fills 100mm EURUSD @1.0845

Example 5: Key Takeaways

If there is an imbalance where two or more orders contribute the same number of price improvement dollars (Orders 1 and 2), allocation is round-robin from a randomized starting point.

Example 6

Example 6: Scenario

Order 1: Buy 100m EURUSD @ 1.0860
Order 2: Buy 100m EURUSD @ 1.0850
Order 3: Sell 100m EURUSD @ 1.0840

Example 6: Outcome

Orders 1 and 3 receive a fill for 100m EURUSD @ 1.0850

Example 6: Key Takeaways

Order 1 has a higher match priority than Order 2 given that it contributes more price improvement dollars to the auction: 100⋅(1.0860−1.0850)>100⋅(1.0850-1.0850). In the traditional FIFO exchange model whichever marketable order arrived first would be filled and price improvement would accrue to the aggressor.

Example 7

Example 7: Scenario

Order 1: Buy 100m EURUSD @ 1.0850
Order 2: Buy 200m EURUSD @ 1.0850
Order 3: Sell 200m EURUSD @ 1.0840

Example 7: Outcome

Order 2 receives a fill for 200m EURUSD @ 1.0845, and Order 3 receives a fill for 200m EURUSD @ 1.0845. Order 1 does not receive a fill and moves to the next auction. 4

Example 7: Key Takeaways

Order 2 being fully filled yields the same notional PI and volume executed as Order 1 being fully filled and Order 2 receiving a partialI: 200⋅(1.0850-1.0845) = 10 = 100⋅(1.0850-1.0845) +100⋅(1.0850-1.0845), but the larger size of Order 2 is rewarded.

Example 8

Example 8: Scenario

Order 1: Buy 100m EURUSD @ 1.0860
Order 2: Buy 100m EURUSD @ 1.0880
Order 3: Sell 100m EURUSD @ 1.0850
Order 4: Sell 100m EURUSD @ 1.0860

Example 8: Outcome

Orders 1–4 fill 100m EURUSD @ 1.0860.

Example 8: Key Takeaways

Filling all orders is both possible and optimal, and the only price at which all orders can fill is 1.0860. Neither the least aggressive buy (Order 1) nor the least aggressive sell (Order 4) receives price improvement; Orders 2 and 3 do.

Example 9

Example 9: Scenario

Order 1: Buy 100m EURUSD @ 1.0860
Order 2: Buy 100m EURUSD @ 1.0880
Order 3: Sell 100m EURUSD @ 1.0850
Order 4: Sell 100m EURUSD @ 1.0860
Order 5: Buy 1m EURUSD @ 1.0860

Example 9: Outcome

Orders 1–4 fill 100m EURUSD @ 1.0860, order 5 clears nothing and moves to next auction.

Example 9: Key Takeaways

Similar to the previous example though a small order has entered the book. Given Orders 1 and 2 provide more notional price improvement than order 5 to the book given their notional sizes they are prioritized and will receive fills before Order 5.